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Kiko dives into the Web 2.0 deadpool, business model AWOL

This week Web 2.0 startup Kiko put itself up for sale on eBay, after its founders seemingly became bored or disillusioned.

Kiko, which is priced at $49,999 (it has yet to attract a bid), is an online calendar built using Ruby on the Rails and claims about 40,000 users per month. Which, in case you are wondering, is a cost to the ‘business’. Kiko doesn’t appear to have any notable revenue streams.

The eBay ad states: “We are selling Kiko because we want to have time to work on other projects as a development team. We had a project in mind we just didn't want to wait on.”

Last month I threw a little mud at Graham, a notable entrepreneur, respected programmer and essayist, after he made some comments about a) geeks running businesses and b) there being no need to worry about a business model until a website achieves critical mass. I agree with Graham on a lot of things, but this sort of talk is downright dangerous.

Graham said: “The idea of building something popular then figuring out how to make money from it was born in the Bubble. It sounds irresponsible, but it works.”

Kiko has unfortunately proved this comment to be somewhat wide of the mark. This is not Web 2.0, people, it is folly. No business equals no future, not for the investor or for the founders. Sometimes these tech ‘projects’ do become great businesses (Google), but I think the emphasis should be on ‘sometimes’.

The dumb 'get scale, get acquired' model has been revised: 'Get scale, get business model, get acquired'. Still sounds dumb to me.

Graham notes on Reddit (another likeable project YC has invested in) that Kiko “had more conventional acquisition offers, but they were lowball offers that basically amounted to a hiring bonus for Justin and Emmett”. It sounds as if YC is continuing to back them and their new startup, rather than allowing them to be ‘acquired’ as part of a deal to buy Kiko. More on that as it breaks, I guess.

When defending the fact that they are selling via eBay, rather than via YC’s direct connections to VCs / big internet companies / other potential acquirers, he says: “Since they're just selling the code, rather than the code plus themselves as in a conventional acquisition, this is a perfectly reasonable way to do it … You can't expect YC to have connections to all these companies.”

There are also two admirably transparent post-mortems written by people on the Kiko team. Both are worth reading.

The first one, from Kiko founder Justin Kan, addresses the problems and issues faced by a tech startup, focusing on the project stuff and the operational stuff. It doesn’t mention anything about the business stuff, which is fundamental to why they’ve bailed (let’s face it – if a 100% feature rich Kiko was likely to be sold for $100m anytime soon then they’d still be beavering away).

Meanwhile Richard White, Kiko’s UI designer, says: “We did not run out of money. In fact, we pulled up well short of the end of our runway. So if you'd like to make the argument that our lack of a business model did us in, go for it, but it has little basis in reality.”

But he adds: “We didn't have a plan for how to go mainstream, which, in hindsight, was a prerequisite for our success. We would have needed capital to do old school PR, marketing and sales and develop a sync service for Outlook.”

Methinks he doth protest too much. All of those things should be nailed down in the business plan, or at least vaguely anticipated. So it absolutely is a business model issue. The fact is that Kiko is a cool web app, but cool web apps do not necessarily make for solid businesses / investments.

The online calendar space is oversaturated and there are some good tools out there (30boxes and Google Calendar both get the thumbs up from the blogosphere), but the fundamental question is whether any of them can make any kind of money.

The Kiko founders are undoubtedly smart and we’ll be looking out for their next move. Let’s hope they choose something that will better reward them for all those hours spent innovating.

At any rate, Kiko’s entry into the 2006 deadpool is simply a case of ‘startup fails’ rather than the impending death of this amorphous creature we've all been calling Web 2.0.

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